Investments

9 Months Ended

Sep. 30, 2021

INVESTMENTS

Money Market Investments. As of September 30, 2021 the Company had no money market investments, compared to $268.8 million at December 31, 2020, that are classified as cash and cash equivalents in the Company’s Condensed Consolidated Balance Sheets.

Investments in Marketable Equity Securities. Investments in marketable equity securities consist of the following:


	As of
	September 30, 2021		December 31, 2020
(in thousands)
Total cost	$	275,825	$	232,847
Gross unrealized gains	489,191		340,255
Gross unrealized losses	(185)		—
Total Fair Value	$	764,831	$	573,102

At September 30, 2021 and December 31, 2020, the Company owned 44,430 shares and 28,000 shares, respectively, in Markel Corporation (Markel) valued at $53.1 million and $28.9 million, respectively. The Co-Chief Executive Officer of Markel, Mr. Thomas S. Gayner, is a member of the Company’s Board of Directors. As of September 30, 2021, there was no marketable equity security holding that exceeded 5% of the Company’s total assets.

The Company purchased $48.0 million of marketable equity securities during the first nine months of 2021. There were no purchases of marketable equity securities during the first nine months of 2020.

During the first nine months of 2021, the gross cumulative realized gains from the sales of marketable equity securities were $27.7 million. The total proceeds from such sales were $38.3 million. During the first nine months of 2020, the gross cumulative realized gains from the sales of marketable equity securities were $23.0 million. The total proceeds from such sales were $93.8 million.

The net gain (loss) on marketable equity securities comprised the following:


	Three Months Ended September 30				Nine Months Ended September 30
(in thousands)	2021		2020		2021		2020
Gain (loss) on marketable equity securities, net	$	14,069	$	59,364	$	176,981	$	(1,139)
Less: Net losses (gains) in earnings from marketable equity securities sold and donated	411		—		(7,750)		13,382
Net unrealized gains in earnings from marketable equity securities still held at the end of the period	$	14,480	$	59,364	$	169,231	$	12,243

Investments in Affiliates. As of September 30, 2021, the Company held an approximate 12% interest in Intersection Holdings, LLC, and in several other affiliates; Graham Healthcare Group (GHG) held a 40% interest in Residential Home Health Illinois, a 42.5% interest in Residential Hospice Illinois, a 40% interest in the joint venture formed between GHG and a Michigan hospital, and a 40% interest in the joint venture formed between GHG and Allegheny Health Network (AHN). For the three and nine months ended September 30, 2021, the Company recorded $2.8 million and $8.0 million, respectively, in revenue for services provided to the affiliates of GHG. For the three and nine months ended September 30, 2020, the Company recorded $2.4 million and $7.1 million, respectively, in revenue for services provided to the affiliates of GHG.

The Company had $51.3 million and $26.1 million in its investment account that represents cumulative undistributed income in its investments in affiliates as of September 30, 2021 and December 31, 2020, respectively.

In the third quarter of 2021, the Company recorded an impairment charge of $6.6 million on one of its investments in affiliates as a result of the challenging economic environment for this business following an announcement by the Chinese government to reform the education sector for private education companies. In the first quarter of 2020, the Company recorded impairment charges of $3.6 million on two of its investments in affiliates as a result of the challenging economic environment for these businesses, of which $2.7 million related to the Company’s investment in Framebridge. It is reasonably possible that further COVID-19 disruptions could result in additional impairment charges related to the Company’s investments in affiliates should the impact of COVID-19 not dissipate or have a worsening adverse impact on our affiliates in future periods. The Company records its share of the earnings or losses of its affiliates from their most recent available financial statements. In some instances, the reporting period of the affiliates’ financial statements lags the Company’s financial reporting period, but such lag is never more than three months. It is possible that the Company’s results of operations for the nine months ended September 30, 2021 does not capture the impact of the COVID-19 pandemic on the earnings or losses of the affiliates whose financial results are recorded on a lag basis.

In May 2020, the Company made an additional investment in Framebridge (see Note 2) that resulted in the Company obtaining control of the investee. The results of operations, cash flows, assets and liabilities of Framebridge are included in the condensed consolidated financial statements of the Company from the date of the acquisition. Timothy J. O’Shaughnessy, President and Chief Executive Officer of Graham Holdings Company, was a personal investor in Framebridge and served as Chairman of the Board prior to the acquisition of the additional interest. The Company acquired Mr. O’Shaughnessy’s interest under the same terms as the other Framebridge investors.

Additionally, Kaplan International Holdings Limited (KIHL) held a 45% interest in a joint venture formed with York University. KIHL loaned the joint venture £22 million, which loan is repayable over 25 years at an interest rate of 7% and guaranteed by the University of York. The loan is repayable by December 2041.

Cost Method Investments. The Company held investments without readily determinable fair values in a number of equity securities that are accounted for as cost method investments, which are recorded at cost, less impairment, and adjusted for observable price changes for identical or similar investments of the same issuer. The carrying value of these investments was $48.5 million and $35.7 million as of September 30, 2021 and December 31, 2020, respectively. During the first nine months of 2021, the Company recorded gains of $10.5 million to those equity securities based on observable transactions. During the three and nine months ended September 30, 2020, the Company recorded gains of $1.6 million and $4.2 million, respectively, to those equity securities based on observable transactions. During the first nine months of 2020, the Company recorded impairment losses of $2.6 million to those equity securities.